Contrarian Investors’ Move
During the January 2023 uncertainty in the crypto and financial markets, some contrarian investors defied the prevailing sentiment and acquired shares in Grayscale Investment’s Bitcoin Trust (GBTC). Fast forward to the present, these individuals are enjoying substantial rewards for their foresight.
According to TradingView data, GBTC shares have exhibited a remarkable surge of 220% to reach $26.79 this year. In stark contrast, Nvidia Corp (NVDA), the leading S&P 500 stock, recorded a 198% increase, while the index saw a 9% gain.
During this period, BTC’s value doubled, soaring to $35,000, while conventional fixed-income assets like government bonds experienced a noticeable decline.
GBTC’s Optimistic Trajectory
GBTC’s remarkable performance is tied to the optimism regarding a possible green light from the US Securities and Exchange Commission (SEC) to transform the Grayscale Bitcoin Trust into an open-ended BTC ETF. This surge in optimism has led to a reduction in the discount between GBTC shares and the trust’s NAV (net asset value), from 46% at the start of the year to the current 13%.
Traders are taking positions in GBTC shares while selling Bitcoin in the spot/futures market as a hedge against potential downside risks. Once the regulator approves this conversion, market makers anticipate a realignment of the price with the NAV.
Meanwhile, Ilan Solot, co-head of digital assets at Marex Solutions, opined that GBTC has proven to be a consistently rewarding investment. Thus, he congratulated those who engaged in futures trading based on the forecast of a narrowing spread.
As the discount continues to contract in light of mounting expectations for the SEC’s approval of the ETF conversion, traders reinforce bullish sentiments surrounding the cryptocurrency.
Potential Impacts of A GBTC ETF Conversion Approval
Alexander S. Blume, managing partner at Two Prime Digital Assets, explained that with the increasing likelihood of GBTC ETF conversion approval, investors anticipate that market makers will promptly align the price with the NAV once it becomes tradable. He further noted that as this investment tool reverts to its NAV value, the pressure for shorting BTC will diminish and cause upward pressure on BTC’s spot price.
It is worth noting that Bitcoin recorded a rapid 28% surge in less than two weeks, attaining 17-month high above $35,000, primarily fueled by rumors surrounding spot ETFs, including speculation about the listing of IBTC, BlackRock’s spot bitcoin ETF ticker, on the famous clearing house DTCC’s website. Nevertheless, Anticipation is building for the SEC to greenlight many spot-based ETFs in early 2024.
While consensus suggests BTC could trade above the $50,000 price mark post-ETF approval, the increased size of the US financial sector could introduce additional selling pressure to the market. Blume explained that ETFs would provide greater opportunities for institutional participants to short this instrument.
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